The US Congress meeting has investors on edge

28 February, 2017

The US Congress meeting has investors on edge

Trumps speech at the Congress is a long-awaited event for investors, mulling over the room for further rally in the US market. Tax reforms and government spending specifics haven’t still been released and are tingling the market sentiments. Trump speech on Tuesday will most likely straighten out these issues, helping the investors guess the trajectory of further betting.

The EUR/USD braces for the speech swinging in the range of 1.05-1.06 while the CFTC data has shown bearish pressure at a moderate pace for the Euro. The Net position declined from -46.8K to -58.3K in the week ending on 24 February. Uncertainty, surrounding Trump of him being able to live up to the market hopes forces the hedge funds retreat. This in turn flattened the Dollar and possibly made a pullback on the US stock market during the New-York session today.

French elections

Even though Le Pen, is falling behind Emmanuel Macron according to the latest polls, the US experience shows that writing off her candidacy could be too early. A union concluded when the centrist Francois Bayrou allowed Macron to enlist the support of the electorate of France democratic movement and forge ahead in the presidential race (61% vs. 39% for Le Pen). The yield on the French and German bonds continued to decline this week, albeit at a slower pace, pointing to a continued decline in the demand for risk. If a gap between Macron and right-wing party widens, then the European currency may get a boost out of this. The medium-term outlook for the Euro could improve after the Trump’s speech and in case there ´is frustration, the upturn seen on Monday can be extended further in the week.

Oil

The Oil prices crept up to the peaks of early January on the report from National Energy Administration of China. The main idea was that Oil output in the country has been curtailed. This has added optimism to market participants, who are waiting for a market rebalance.  The crude oil production in China fell 7.5%, while data of the growing imports show that China took the cheap oil advantage, showing the fastest growth of imports over the last six years. It is expected that the oil consumption in the country will grow by 4.8% this year, but imports will decline, mainly due to rising prices.

Meanwhile, the commercial US stocks continue to rise, as the market expectations of price recovery creates an attractive opportunity to buy cheap Oil now and sell it more expensive later. Inventories amounted to 518.7 million barrels last week, while the number of working rigs increased to 602.

Safe heavens 

The Japanese Yen and Gold rose in price as the demand for safe haven assets continued to grow, despite the slight pause taken earlier in the week. The USD/JPY is preparing for the penetration of the 112 level while Gold crossed the level of $1,250, the first time since November 2016. Investors are increasingly sceptical in the further growth of the stock indices in the US, as the imperceptible growth of defensive assets may prompt the imminent trend of reversal or correction.


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